February 14, 2024 • 30 mins
A quarter of the world’s population is currently exposed to extremely high water stress each year, and that’s expected to grow to 60% by 2050, according to World Resources Institute’s recent Aqueduct 4.0 report. On this episode of the ESG Currents podcast, Sara Walker, WRI’s Director of Corporate Water Engagement, joins Eric Kane, Bloomberg Intelligence’s Director of ESG Research to discuss corporate water targets, water accounting, the concept of ‘virtual water’, and why the local problem of water has global implications.
The episode recorded as of October 19.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
ESG has become established as a key business theme as
companies and investors seek to navigate the climate crisis, energy transition,
social megatrends, mounting regulatory attention and pressure from other stakeholders.
The rapidly evolving landscape has become inundated with acronyms, buzzwords,
(00:28):
and lingo, and we aim to break these down with
industry experts. Welcome to ESG Currents, brought to you by
Bloomberg Intelligence, your guide to navigating the evolving ESG space,
one topic at a time. I'm Urricane, director of ESG
Research for Bloomberg Intelligence, and I'm your host for today's episode.
(00:50):
Today we're talking about water with Sarah Walker, who is
the director of Corporate Water Engagement in the Water Program
at the World Resources Institution otherwise known as WRI. Sarah,
thanks so much for joining the podcast.
Speaker 2 (01:06):
Thanks Eric, thanks for having me.
Speaker 1 (01:08):
So for our listeners who may be less familiar with
WRI and the Water program, I want to start with
an overview of the organization and kind of the focus
of the water program specifically.
Speaker 2 (01:21):
Yeah, sure, Well. WRII is a global research organization and
we work at the intersection of development and the environment.
And we really aim to make sure people's needs are
met while also protecting nature and combating climate change. So
we're really trying to address systemic problems with the way
(01:41):
we produce food, we manage our land and water, generate energy,
and design our cities. And we have nearly two thousand
people around the world in various countries trying to make
this happen. Within our water work, we're primarily focused on
helping companies, community and governments understand their water risks and
(02:03):
invest in solutions for a water secure future.
Speaker 1 (02:07):
Excellent, And I saw that w or I recently published
an update to its aqueduct report Aqueduct to four point zero,
and there were some pretty alarming statistics, of course, included
in that, one of which is that you know, today
about three point six billion people have inadequate access to
(02:27):
water at least one month a year, and you're predicting
that number to increase quite a bit to more than
five billion by twenty fifty. So curious to hear kind
of ultimately how you're looking to solve this problem through
corporate engagement.
Speaker 2 (02:46):
Yeah, the statistics are are quite dire, and we're I
think we're fortunate to work with a lot of really
innovative and ambitious company. So my work is primarily with
the private sector on corporate water stewardship, and Aqueduct does
(03:07):
serve as a foundation for a lot of that work.
It was created about ten years ago and it's an
open access tool for providing peer reviewed data on current
and future water risks, including water stress, blood strouts. And
like you said, our latest update, Aqueduct four point zero
(03:30):
just come out, came out in August, and we have
chronic trends on water stress globally and other water risks,
and we also have now in this new update, new
future projections on water stress, water demand, water supply out
(03:50):
to twenty eighty in the tool, and that's based on
the latest and greatest climate data. So many in the
private sector use this tool to get a handle on
where the risks are greatest across their portfolio, so particularly
these multinational companies with locations all over the world. It's
(04:15):
a really useful screening tool to kind of look across
all of your operations, even in your value chain as well,
to identify those hot spots and then do some further
digging to understand, you know, what's happening on the ground
and what kind of steps can be taken. So we
(04:35):
provide this tool, we help companies understand these water risks,
and then we do other work with companies that kind
of builds on that. So with that information, how do
you then set targets that mitigate those risks, that make
sure that you're doing your part to solve these water challenges.
So a lot of our work recently has been on
(04:56):
setting meaningful water targets, and there are a variety of
options and more entering the scene every day, it seems.
Speaker 1 (05:07):
So you mentioned the idea of water targets, I think
for those of us in the hPG space, there's been
so much focus, of course, in recent years on climate targets,
carbon reduction targets in particular. We certainly see more and
more companies announcing water targets, but I think it's still
(05:28):
a much smaller number than we see with respect to
carbon and climate directly. So curious as to kind of
your thoughts on why perhaps this issue has not reached
that same level of attention that we see with greenhouse
gas emissions, even though you know, as the stats suggests,
it's equally as dire and obviously certainly related to the
(05:51):
overall climate picture.
Speaker 2 (05:53):
Yeah, great question. So water is tricky when you compare
it to climate in particular. You know, there can carbon
emissions have global implications, right, doesn't matter where they come from.
You know, it's impacting the globe. Water is very local
and so if you reduce water in one area, it's
not going to benefit another area. And so that's why
(06:17):
it's been so tricky to kind of rally behind a
global ambition on water, and it does really just come
down to local conditions in basins. So we've worked with
some partners to develop guidance on how to think about
the local context when setting targets, for setting site based targets,
(06:37):
enterprise wide targets for companies where they can kind of
factor in water risks in every basin where they have activities.
You know, what's the current condition in that basin, what's
the desired condition, and what's that change that's needed to
solve shared water challenges in those basins? And then you
(06:58):
layer in the company footprint, you know, what's how are
they contributing to these challenges? How can they be contributing
to solving them? You know, what, what's the proper level
of ambition for them to help meet desired conditions. So
we've been doing a lot of thinking around that and
a lot of work with companies to kind of understand that.
And it does make for you know, it's not just
(07:19):
one target, it's a lot of targets in some cases,
if there are a lot of areas where where companies
have activities, and then it can roll up into you know,
an overall corporate ambition. And that's just one way of
going about it. Other companies are setting replenishment targets, so
committing to replenishing the volume of water that they consume,
(07:41):
for example, as a way to kind of offset their impact.
We're also involved in the Science Based Target network, so
following in the footsteps of the Science Based Target initiative
for climate, but thinking about how to set targets then
for all of nature, including water, and that follows a
similar approach to to understanding, you know, what are sustainable
(08:03):
thresholds in every basin and calculating targets for companies according
to those and their and their footprints. So there's a
lot of activity, a lot of excitement, a lot of
interest in in setting targets, I would say broadly in
the private sector right now.
Speaker 1 (08:21):
That's really interesting. A couple of things to follow up
on there. So you mentioned, of course, you know that
that waters is local as opposed to you know, carbon,
which is more global, which is obviously I think key
to to the issue. And then you mentioned, of course
that targets have to be kind of specific to a
given basin. So I think therein lies another key difference
(08:43):
between greenhouse gas emission target setting and water setting, right
because we can kind of align or at least try
to align our carbon targets to a certain degree of warming,
which is by and large, you know, global, where is
you know, with water it could be based in specific.
(09:04):
So again I'm kind of curious to hear ultimately how
you kind of measure at a basin level what that
threshold should be, or what you ultimately measure a target against.
Speaker 2 (09:18):
Yeah, it's it can be challenging depending on data availability.
Tools like AQUEDUCT use global hydrologic models, which are good,
like I said, at that high level for those high
level screening purposes, and they can be used to set
(09:41):
targets as well. If you want to think about risk
thresholds that you're comfortable with, you could use tools like
aqueduct to set targets. That way, you could also pull
in more local models and data sets that might have
a better handle on what's happening on the ground. Some
(10:02):
areas have a lot of great data and models, So
a lot of my work in the past has been
focused on the Chesapeake Bay here in the United States,
and it's very data rich, great watershed model that we
can rely on tells us those sustainability thresholds, and in
(10:23):
many other areas that doesn't exist, and so you do
kind of have to fall back on those global data
sets in some cases. And this is something we're trying
to move forward through the science based Target Network because
we do really want to encourage those local sustainability thresholds
to be used. So we're trying to identify where they
(10:44):
exist and where they don't. And it's yeah, it is
unfortunately often the case that there aren't great local data
we can rely on.
Speaker 1 (10:54):
That's interesting. Obviously, the lack of data remains a key
challenge across esg and I certainly think for assessing water
the lack of data is pretty pronounced. You mentioned earlier
the idea of ambition, corporate ambition with respective you know,
(11:15):
decreasing water use and setting targets. Not to keep drawing
parallels to to carbon targets, but perhaps I'll do it
one more time. One of the things, of course, that
we see when we're looking at carbon targets, and I
think with water targets too, is companies often have pretty
ambitious targets, but we don't as investors or analysts, necessarily
(11:39):
have the tools to understand whether these targets are feasible
or whether the plan to achieve the target is feasible.
So I just curious to hear your thoughts on that
and ultimately, you know how you're assessing kind of the
quality or validity of a target.
Speaker 2 (11:59):
Yeah, this is another excellent question, Eric. A couple of
things to share on this point. We actually run a
call the other day with a company and they asked
essentially that same question. You know, if if we go
and set this target based on what the watersheds need,
how do we know that it's even feasible for us
(12:19):
to achieve. I think some companies do take a more
conservative approach and factoring that achievability factor so they can
ensure that what they're committing to is is ultimately something
that they can pull off, and others that we work
with really stick their necks out and say, we know
(12:42):
this is what needs to happen. We're going to commit
to doing our part, you know, to achieve these desired conditions,
these sustainability goals, and we'll figure out how to make
that happen later. But this is what has to happen,
and we'll find a way, or at least we'll do
our best to find a way. So there are different,
(13:04):
you know, levels of tolerance for setting these targets and
different levels of ambition, so we see a variety of
approaches there. WI has been involved in that accounting picture
and developing guidance on how to account for progress toward targets,
(13:29):
and so when thinking about volumetric targets, we have guidance
on volumetric water benefit accounting, so as projects are invested
in that help replenish water, for example, we help provide
methodologies for quantifying those benefits and reporting up to the targets.
(13:50):
We're working on similar guidance now for water quality with
a number of partners, and then we're also expanding upon
those quantifications methods to provide some more guidance on that
transparency picture in a way, the reporting, How often do
you need to make sure those projects are on the ground,
(14:12):
What kind of claims can you make about your progress
and things like that. So we're doing that together with
a number of partners. We've been a number of companies
involved as well, so hoping that this will really provide
some of that much needed guidance across across the private
sector on the accounting and the claims pieces.
Speaker 1 (14:36):
Super interesting. Obviously, one of the big kind of focal
points in the ISGY space these days is around transparency
and disclosure and reporting standards. So just to kind of
expand on that, how does your work fit in with
some of the kind of global frameworks that are out there,
whether it's the work that ISSB is doing for example,
(14:57):
or G or I. Are you collaborating coordinating with those
groups or are your accounting standards kind of something separate
at this point.
Speaker 2 (15:08):
Yeah, the accounting standards that I just mentioned are a
bit separate. Those are more around accounting against targets. But
we certainly are plugged in with ESG reporting. You know,
companies use aqueduct for example, to report to CDP, and
we're trying to monitor you know, all these other acronyms
(15:30):
that are out there for ESG reporting and making sure
that our tools and our data and our guidance can
continue to be useful.
Speaker 1 (15:41):
So maybe I'll just take an opportunity to read another
stat from the recent aqueduct report, and this one is
equally alarming and leads to my next question. But so,
according to your recent research about seventy trillion dollars in GDP,
thirty one percent of global GDP will be exposed to
(16:05):
high water stress by twenty fifty, up from about fifteen
trillion or twenty four percent of global global GDP in
twenty ten. So obviously a pretty significant stat, pretty alarming
stat with that as the context seems to me that
investors are still not really paying attention to water as
(16:28):
much as they should. So I want to hear your
thoughts on ultimately you know how through your work and others,
we can better help the market really understand these risks
and ultimately you know how to incorporate these risks into
(16:49):
investment decisions.
Speaker 2 (16:52):
Yeah, certainly the ESG reporting is helpful as you know
a basic understanding of of the risks that companies are
exposed to. And you're right, there's there's a lot more action.
I think that's needed, a lot of I think understanding
(17:15):
that it's hard to get at due to lack of
data in some cases and lack of reporting, and I
think it's it's fair for investors to start expecting and
asking companies to respond to these risks and to be
adapting accordingly. We can't continue down this business as usual path.
(17:37):
You know, we're already seeing stranded assets and there's all
kinds of you know, increasing threats from climate change that's
only going to kind of exacerbate this issue. So using
tools that are out there from ESG reporting aqueduct to
kind of get a handle on as much publicly available
(17:58):
data as possible, but also expecting more from companies on
disclosure about their activities, their locations, their risks, I think
would go a long way.
Speaker 1 (18:09):
Absolutely, that makes sense. I think one of the challenges,
and curious to hear your thoughts, goes back to something
that you mentioned before, which again is the idea that
water is local. So the challenge there, you know, versus
other environmental issues, whether it be air pollution or or
JHG emissions is I think it's it's harder ultimately to
(18:33):
kind of put a price on water that is, uh,
you know, perhaps applicable kind of across a market, as
opposed to you know, greenhouse gas emissions trading markets that
we see in various regions, you know, other air pollutant
trading markets. Has there ever been kind of any discussions
(18:57):
of a global water market, global water taxes, anything like that. Yeah.
Speaker 2 (19:04):
Again, it's tricky because water isn't a global issue. Water
challenges don't have you know, global reach. There are certainly
some geographies that have tried or do you have water
markets both for quantity and for quality. I used to
be involved more in the water quality markets where we
(19:24):
had a similar kind of market as carbon but for
nitrogen phosphorus credits. So I mentioned the Chesapeake Bay earlier,
and there's a cap there on nutrients for the Chesapeake
Bay watershed. So any additional growth, you know, new companies
(19:46):
coming into operation in the watershed, all of the nutrient
load associated with their activities have to be offset. And
so there has been development there for water quality market
and similarly in other places for water quantity. But again
it is just it's very local and that makes it challenging.
Speaker 1 (20:06):
Yeah. Absolutely, Speaking of the local nature, I was reading
an interesting article on the water challenges that we face
in preparation for this discussion, and one of the terms
which which I had not heard before, that was used
in the article is this idea of virtual water, which
is water that is essentially embedded in other products, whether
(20:30):
it be agricultural products, whether it be oil for example.
And these things, of course are being traded, you know, globally,
moving around various markets, and and you know, based on
what I was reading, is it's you know, an overwhelming
percentage of water is ultimately kind of virtual water, if
(20:51):
you will. So I was wondering if you know, given that,
there's any potential for thinking about you know, similar to
like a carbon important tax or something like that, where
you can try to account for the water used in
a product as part of you know, other global trade
(21:12):
mechanisms in a way to again try to encourage efficiency
and reduction and the ultimate use of this valuable resource.
Speaker 2 (21:22):
Yeah, I think that's a really interesting idea. This virtual
water concept is is challenging for a number of reasons,
and it's something that we're grappling with and thinking about,
particularly in areas where this virtual water is originating from
(21:44):
water scarce geographies and then being exported to areas that
have plentyful water and their equity concerns with that and
if you you know, local economies are benefits from these exports,
but is it the most equitable approach? So we I
(22:06):
don't know that we have solutions right now, but we
are thinking about it. And this is one of those
you know, I mentioned in the beginning about w I like,
we are really trying to tackle these systemic challenges and
this is this is a big one that we're continuing
to think about and making sure that we're using our
water resources appropriately and compensating for it appropriately.
Speaker 1 (22:31):
Absolutely, another thing that I was thinking about the other
day that wanted to get your thoughts on this. It
seems like so many of the solutions to various global
problems ultimately kind of contribute to other problems. So to
actually explain what I mean, when we think about something
(22:52):
like evs or you know, wires necessary to transport electricity,
we see increased demand for copper for example, copper's super
water intensive two create So how do you kind of
(23:13):
address this concept of solutions to one issue ultimately contributing
to perhaps you know, more water use In this example, Yeah.
Speaker 2 (23:24):
Great example, just before talking to you, I was in
a meeting with some other WI colleagues about energy minerals
including copper, and how all of us across the institute,
who are working in different sectors on different issues, can
really come together and try to tackle this. It's a
(23:45):
big one and one that we've been in the Water
team have been thinking a lot about recently, as we
do see this increase in electric vehicles, like you mentioned,
more renewable energy. All these things are critical to solve
the climate crisis, and there are water ramifications to the
(24:09):
mining of these of these important critical minerals, both from
a water quantity standpoint and from a water quality standpoint.
And we've seen a lot of interest over the past
few years from companies and awareness about water risks not
(24:31):
just in their direct operations, but across their whole value chain,
and so particularly for these companies that rely on these
minerals upstream in their supply chain, which could be you know,
the automotive sector for the lithium and electric vehicle batteries,
renewable energy sector, the tech sector making cell phones you know,
(24:52):
also relying on on these minerals for batteries. For example,
we need to get a better handle on those impacts
and and how to mitigate those through more responsible mining
and recycling and you know, the whole range of possibilities.
(25:14):
So it's encouraging that we're seeing this interest in understanding
risks across the value chain, you know, not just focused
on draft operations, but impacts upstream as well. But the
data aren't always there too to provide good, good guidance,
(25:36):
So it's something that we're keen to explore here in
the near future.
Speaker 1 (25:40):
Absolutely, that sounds good. So you mentioned the idea of
you know, exploring things in the near future. Wanted to
maybe close with a question around your plans going forward
and kind of where you see wris water work, you know,
focus saying over the next year, and ultimately where you
(26:05):
might see some uh, some cause for optimism because I
think we've had a little bit of a pessimistic conversation here.
It's a concerning situation. But maybe we could get your
your thoughts on those two things to close.
Speaker 2 (26:18):
Yeah, sure, I know these these conversations tend to be
a bit depressing, so I'll do my best here. So
we're we're seeing just you know, increased complications across these
issues based on the interconnectedness, you know, the trade offs
like we were just talking about, and then some of
these issues only being exacerbated with climate change and economic development.
(26:43):
And so we're really striving at w I to take
a more holistic approach to these issues. And we have
a new strategy that's that's trying to look across all
these systemic challenges to and then organize ourselves accordingly internally
(27:05):
to try to generate benefits, you know, across multiple areas.
And of course to do that, we need a lot
more people at the table. And this takes you know,
not just ENGOs and companies, but many others. You know,
no company, no sector is going to solve any of
(27:25):
these problems. We need government as well involved. We need
civil society, you know, we need everyone at the table
to engage on these issues, to agree on a common
vision and how to get there, and everyone involved in
in making that happen. So that then, given the nature
(27:48):
of water requires more kind of place based work. We
got to bring everyone to the table, you know, in
all these areas where where we're seeing significant water risks.
So wi IS is when I first started fourteen years ago,
we just had an office in DC, and we now
(28:08):
have offices all over the world. We are deepening our
engagement in focused countries to really target those high priority
areas and really try to increase our impact on the ground.
So we've been making this transition over many years from
my perspective as being a very research focused think tank
(28:30):
to more of a do tank because we recognize that
it's going to take more than research to solve these problems.
So I'm encouraged by where we're headed, and I'm seeing
not just from within WI but externally a lot more
focus on collective action and how we bring everyone together.
(28:50):
And this is and maybe this is just because I'm
from where I said, I work with the private sector,
but you know they are in many cases the ones
pushing it. They realize they're not going to solve it alone.
They want governments involved, and so I'm hopeful that we
may start to see some more collaboration and collective action
to solve these very challenging systemic problems.
Speaker 1 (29:14):
Absolutely, very interesting. Thank you. I really liked the idea
of transforming from a research think tank to a do tank.
I like it a lot. So I just wanted to
remind our listeners we were joined today by Sarah Walker,
who's the director of Corporate Water Engagement in the Water
(29:34):
Program at the World of Resources Institute. Sarah, thank you
so much for joining us today.
Speaker 2 (29:41):
Thank you Eric, thanks for having me.
Speaker 1 (29:45):
So. You can find more information on ESG data reporting
all things water by going to the Environmental tab on
the ESG team dashboard, bispace ESG go on the Bloomberg terminal.
If you have an ESG quandary, your burning question you
would like to ask bi's expert analysts, send us an
email at ESG Currents at Bloomberg dot net. Thank you
(30:08):
again for listening, and we'll speak to you next time.
ESG has become established as a key business theme as
companies and investors seek to navigate the climate crisis, energy transition,
social megatrends, mounting regulatory attention and pressure from other stakeholders.
The rapidly evolving landscape has become inundated with acronyms, buzzwords,
(00:28):
and lingo, and we aim to break these down with
industry experts. Welcome to ESG Currents, brought to you by
Bloomberg Intelligence, your guide to navigating the evolving ESG space,
one topic at a time. I'm Urricane, director of ESG
Research for Bloomberg Intelligence, and I'm your host for today's episode.
(00:50):
Today we're talking about water with Sarah Walker, who is
the director of Corporate Water Engagement in the Water Program
at the World Resources Institution otherwise known as WRI. Sarah,
thanks so much for joining the podcast.
Speaker 2 (01:06):
Thanks Eric, thanks for having me.
Speaker 1 (01:08):
So for our listeners who may be less familiar with
WRI and the Water program, I want to start with
an overview of the organization and kind of the focus
of the water program specifically.
Speaker 2 (01:21):
Yeah, sure, Well. WRII is a global research organization and
we work at the intersection of development and the environment.
And we really aim to make sure people's needs are
met while also protecting nature and combating climate change. So
we're really trying to address systemic problems with the way
(01:41):
we produce food, we manage our land and water, generate energy,
and design our cities. And we have nearly two thousand
people around the world in various countries trying to make
this happen. Within our water work, we're primarily focused on
helping companies, community and governments understand their water risks and
(02:03):
invest in solutions for a water secure future.
Speaker 1 (02:07):
Excellent, And I saw that w or I recently published
an update to its aqueduct report Aqueduct to four point zero,
and there were some pretty alarming statistics, of course, included
in that, one of which is that you know, today
about three point six billion people have inadequate access to
(02:27):
water at least one month a year, and you're predicting
that number to increase quite a bit to more than
five billion by twenty fifty. So curious to hear kind
of ultimately how you're looking to solve this problem through
corporate engagement.
Speaker 2 (02:46):
Yeah, the statistics are are quite dire, and we're I
think we're fortunate to work with a lot of really
innovative and ambitious company. So my work is primarily with
the private sector on corporate water stewardship, and Aqueduct does
(03:07):
serve as a foundation for a lot of that work.
It was created about ten years ago and it's an
open access tool for providing peer reviewed data on current
and future water risks, including water stress, blood strouts. And
like you said, our latest update, Aqueduct four point zero
(03:30):
just come out, came out in August, and we have
chronic trends on water stress globally and other water risks,
and we also have now in this new update, new
future projections on water stress, water demand, water supply out
(03:50):
to twenty eighty in the tool, and that's based on
the latest and greatest climate data. So many in the
private sector use this tool to get a handle on
where the risks are greatest across their portfolio, so particularly
these multinational companies with locations all over the world. It's
(04:15):
a really useful screening tool to kind of look across
all of your operations, even in your value chain as well,
to identify those hot spots and then do some further
digging to understand, you know, what's happening on the ground
and what kind of steps can be taken. So we
(04:35):
provide this tool, we help companies understand these water risks,
and then we do other work with companies that kind
of builds on that. So with that information, how do
you then set targets that mitigate those risks, that make
sure that you're doing your part to solve these water challenges.
So a lot of our work recently has been on
(04:56):
setting meaningful water targets, and there are a variety of
options and more entering the scene every day, it seems.
Speaker 1 (05:07):
So you mentioned the idea of water targets, I think
for those of us in the hPG space, there's been
so much focus, of course, in recent years on climate targets,
carbon reduction targets in particular. We certainly see more and
more companies announcing water targets, but I think it's still
(05:28):
a much smaller number than we see with respect to
carbon and climate directly. So curious as to kind of
your thoughts on why perhaps this issue has not reached
that same level of attention that we see with greenhouse
gas emissions, even though you know, as the stats suggests,
it's equally as dire and obviously certainly related to the
(05:51):
overall climate picture.
Speaker 2 (05:53):
Yeah, great question. So water is tricky when you compare
it to climate in particular. You know, there can carbon
emissions have global implications, right, doesn't matter where they come from.
You know, it's impacting the globe. Water is very local
and so if you reduce water in one area, it's
not going to benefit another area. And so that's why
(06:17):
it's been so tricky to kind of rally behind a
global ambition on water, and it does really just come
down to local conditions in basins. So we've worked with
some partners to develop guidance on how to think about
the local context when setting targets, for setting site based targets,
(06:37):
enterprise wide targets for companies where they can kind of
factor in water risks in every basin where they have activities.
You know, what's the current condition in that basin, what's
the desired condition, and what's that change that's needed to
solve shared water challenges in those basins? And then you
(06:58):
layer in the company footprint, you know, what's how are
they contributing to these challenges? How can they be contributing
to solving them? You know, what, what's the proper level
of ambition for them to help meet desired conditions. So
we've been doing a lot of thinking around that and
a lot of work with companies to kind of understand that.
And it does make for you know, it's not just
(07:19):
one target, it's a lot of targets in some cases,
if there are a lot of areas where where companies
have activities, and then it can roll up into you know,
an overall corporate ambition. And that's just one way of
going about it. Other companies are setting replenishment targets, so
committing to replenishing the volume of water that they consume,
(07:41):
for example, as a way to kind of offset their impact.
We're also involved in the Science Based Target network, so
following in the footsteps of the Science Based Target initiative
for climate, but thinking about how to set targets then
for all of nature, including water, and that follows a
similar approach to to understanding, you know, what are sustainable
(08:03):
thresholds in every basin and calculating targets for companies according
to those and their and their footprints. So there's a
lot of activity, a lot of excitement, a lot of
interest in in setting targets, I would say broadly in
the private sector right now.
Speaker 1 (08:21):
That's really interesting. A couple of things to follow up
on there. So you mentioned, of course, you know that
that waters is local as opposed to you know, carbon,
which is more global, which is obviously I think key
to to the issue. And then you mentioned, of course
that targets have to be kind of specific to a
given basin. So I think therein lies another key difference
(08:43):
between greenhouse gas emission target setting and water setting, right
because we can kind of align or at least try
to align our carbon targets to a certain degree of warming,
which is by and large, you know, global, where is
you know, with water it could be based in specific.
(09:04):
So again I'm kind of curious to hear ultimately how
you kind of measure at a basin level what that
threshold should be, or what you ultimately measure a target against.
Speaker 2 (09:18):
Yeah, it's it can be challenging depending on data availability.
Tools like AQUEDUCT use global hydrologic models, which are good,
like I said, at that high level for those high
level screening purposes, and they can be used to set
(09:41):
targets as well. If you want to think about risk
thresholds that you're comfortable with, you could use tools like
aqueduct to set targets. That way, you could also pull
in more local models and data sets that might have
a better handle on what's happening on the ground. Some
(10:02):
areas have a lot of great data and models, So
a lot of my work in the past has been
focused on the Chesapeake Bay here in the United States,
and it's very data rich, great watershed model that we
can rely on tells us those sustainability thresholds, and in
(10:23):
many other areas that doesn't exist, and so you do
kind of have to fall back on those global data
sets in some cases. And this is something we're trying
to move forward through the science based Target Network because
we do really want to encourage those local sustainability thresholds
to be used. So we're trying to identify where they
(10:44):
exist and where they don't. And it's yeah, it is
unfortunately often the case that there aren't great local data
we can rely on.
Speaker 1 (10:54):
That's interesting. Obviously, the lack of data remains a key
challenge across esg and I certainly think for assessing water
the lack of data is pretty pronounced. You mentioned earlier
the idea of ambition, corporate ambition with respective you know,
(11:15):
decreasing water use and setting targets. Not to keep drawing
parallels to to carbon targets, but perhaps I'll do it
one more time. One of the things, of course, that
we see when we're looking at carbon targets, and I
think with water targets too, is companies often have pretty
ambitious targets, but we don't as investors or analysts, necessarily
(11:39):
have the tools to understand whether these targets are feasible
or whether the plan to achieve the target is feasible.
So I just curious to hear your thoughts on that
and ultimately, you know how you're assessing kind of the
quality or validity of a target.
Speaker 2 (11:59):
Yeah, this is another excellent question, Eric. A couple of
things to share on this point. We actually run a
call the other day with a company and they asked
essentially that same question. You know, if if we go
and set this target based on what the watersheds need,
how do we know that it's even feasible for us
(12:19):
to achieve. I think some companies do take a more
conservative approach and factoring that achievability factor so they can
ensure that what they're committing to is is ultimately something
that they can pull off, and others that we work
with really stick their necks out and say, we know
(12:42):
this is what needs to happen. We're going to commit
to doing our part, you know, to achieve these desired conditions,
these sustainability goals, and we'll figure out how to make
that happen later. But this is what has to happen,
and we'll find a way, or at least we'll do
our best to find a way. So there are different,
(13:04):
you know, levels of tolerance for setting these targets and
different levels of ambition, so we see a variety of
approaches there. WI has been involved in that accounting picture
and developing guidance on how to account for progress toward targets,
(13:29):
and so when thinking about volumetric targets, we have guidance
on volumetric water benefit accounting, so as projects are invested
in that help replenish water, for example, we help provide
methodologies for quantifying those benefits and reporting up to the targets.
(13:50):
We're working on similar guidance now for water quality with
a number of partners, and then we're also expanding upon
those quantifications methods to provide some more guidance on that
transparency picture in a way, the reporting, How often do
you need to make sure those projects are on the ground,
(14:12):
What kind of claims can you make about your progress
and things like that. So we're doing that together with
a number of partners. We've been a number of companies
involved as well, so hoping that this will really provide
some of that much needed guidance across across the private
sector on the accounting and the claims pieces.
Speaker 1 (14:36):
Super interesting. Obviously, one of the big kind of focal
points in the ISGY space these days is around transparency
and disclosure and reporting standards. So just to kind of
expand on that, how does your work fit in with
some of the kind of global frameworks that are out there,
whether it's the work that ISSB is doing for example,
(14:57):
or G or I. Are you collaborating coordinating with those
groups or are your accounting standards kind of something separate
at this point.
Speaker 2 (15:08):
Yeah, the accounting standards that I just mentioned are a
bit separate. Those are more around accounting against targets. But
we certainly are plugged in with ESG reporting. You know,
companies use aqueduct for example, to report to CDP, and
we're trying to monitor you know, all these other acronyms
(15:30):
that are out there for ESG reporting and making sure
that our tools and our data and our guidance can
continue to be useful.
Speaker 1 (15:41):
So maybe I'll just take an opportunity to read another
stat from the recent aqueduct report, and this one is
equally alarming and leads to my next question. But so,
according to your recent research about seventy trillion dollars in GDP,
thirty one percent of global GDP will be exposed to
(16:05):
high water stress by twenty fifty, up from about fifteen
trillion or twenty four percent of global global GDP in
twenty ten. So obviously a pretty significant stat, pretty alarming
stat with that as the context seems to me that
investors are still not really paying attention to water as
(16:28):
much as they should. So I want to hear your
thoughts on ultimately you know how through your work and others,
we can better help the market really understand these risks
and ultimately you know how to incorporate these risks into
(16:49):
investment decisions.
Speaker 2 (16:52):
Yeah, certainly the ESG reporting is helpful as you know
a basic understanding of of the risks that companies are
exposed to. And you're right, there's there's a lot more action.
I think that's needed, a lot of I think understanding
(17:15):
that it's hard to get at due to lack of
data in some cases and lack of reporting, and I
think it's it's fair for investors to start expecting and
asking companies to respond to these risks and to be
adapting accordingly. We can't continue down this business as usual path.
(17:37):
You know, we're already seeing stranded assets and there's all
kinds of you know, increasing threats from climate change that's
only going to kind of exacerbate this issue. So using
tools that are out there from ESG reporting aqueduct to
kind of get a handle on as much publicly available
(17:58):
data as possible, but also expecting more from companies on
disclosure about their activities, their locations, their risks, I think
would go a long way.
Speaker 1 (18:09):
Absolutely, that makes sense. I think one of the challenges,
and curious to hear your thoughts, goes back to something
that you mentioned before, which again is the idea that
water is local. So the challenge there, you know, versus
other environmental issues, whether it be air pollution or or
JHG emissions is I think it's it's harder ultimately to
(18:33):
kind of put a price on water that is, uh,
you know, perhaps applicable kind of across a market, as
opposed to you know, greenhouse gas emissions trading markets that
we see in various regions, you know, other air pollutant
trading markets. Has there ever been kind of any discussions
(18:57):
of a global water market, global water taxes, anything like that. Yeah.
Speaker 2 (19:04):
Again, it's tricky because water isn't a global issue. Water
challenges don't have you know, global reach. There are certainly
some geographies that have tried or do you have water
markets both for quantity and for quality. I used to
be involved more in the water quality markets where we
(19:24):
had a similar kind of market as carbon but for
nitrogen phosphorus credits. So I mentioned the Chesapeake Bay earlier,
and there's a cap there on nutrients for the Chesapeake
Bay watershed. So any additional growth, you know, new companies
(19:46):
coming into operation in the watershed, all of the nutrient
load associated with their activities have to be offset. And
so there has been development there for water quality market
and similarly in other places for water quantity. But again
it is just it's very local and that makes it challenging.
Speaker 1 (20:06):
Yeah. Absolutely, Speaking of the local nature, I was reading
an interesting article on the water challenges that we face
in preparation for this discussion, and one of the terms
which which I had not heard before, that was used
in the article is this idea of virtual water, which
is water that is essentially embedded in other products, whether
(20:30):
it be agricultural products, whether it be oil for example.
And these things, of course are being traded, you know, globally,
moving around various markets, and and you know, based on
what I was reading, is it's you know, an overwhelming
percentage of water is ultimately kind of virtual water, if
(20:51):
you will. So I was wondering if you know, given that,
there's any potential for thinking about you know, similar to
like a carbon important tax or something like that, where
you can try to account for the water used in
a product as part of you know, other global trade
(21:12):
mechanisms in a way to again try to encourage efficiency
and reduction and the ultimate use of this valuable resource.
Speaker 2 (21:22):
Yeah, I think that's a really interesting idea. This virtual
water concept is is challenging for a number of reasons,
and it's something that we're grappling with and thinking about,
particularly in areas where this virtual water is originating from
(21:44):
water scarce geographies and then being exported to areas that
have plentyful water and their equity concerns with that and
if you you know, local economies are benefits from these exports,
but is it the most equitable approach? So we I
(22:06):
don't know that we have solutions right now, but we
are thinking about it. And this is one of those
you know, I mentioned in the beginning about w I like,
we are really trying to tackle these systemic challenges and
this is this is a big one that we're continuing
to think about and making sure that we're using our
water resources appropriately and compensating for it appropriately.
Speaker 1 (22:31):
Absolutely, another thing that I was thinking about the other
day that wanted to get your thoughts on this. It
seems like so many of the solutions to various global
problems ultimately kind of contribute to other problems. So to
actually explain what I mean, when we think about something
(22:52):
like evs or you know, wires necessary to transport electricity,
we see increased demand for copper for example, copper's super
water intensive two create So how do you kind of
(23:13):
address this concept of solutions to one issue ultimately contributing
to perhaps you know, more water use In this example, Yeah.
Speaker 2 (23:24):
Great example, just before talking to you, I was in
a meeting with some other WI colleagues about energy minerals
including copper, and how all of us across the institute,
who are working in different sectors on different issues, can
really come together and try to tackle this. It's a
(23:45):
big one and one that we've been in the Water
team have been thinking a lot about recently, as we
do see this increase in electric vehicles, like you mentioned,
more renewable energy. All these things are critical to solve
the climate crisis, and there are water ramifications to the
(24:09):
mining of these of these important critical minerals, both from
a water quantity standpoint and from a water quality standpoint.
And we've seen a lot of interest over the past
few years from companies and awareness about water risks not
(24:31):
just in their direct operations, but across their whole value chain,
and so particularly for these companies that rely on these
minerals upstream in their supply chain, which could be you know,
the automotive sector for the lithium and electric vehicle batteries,
renewable energy sector, the tech sector making cell phones you know,
(24:52):
also relying on on these minerals for batteries. For example,
we need to get a better handle on those impacts
and and how to mitigate those through more responsible mining
and recycling and you know, the whole range of possibilities.
(25:14):
So it's encouraging that we're seeing this interest in understanding
risks across the value chain, you know, not just focused
on draft operations, but impacts upstream as well. But the
data aren't always there too to provide good, good guidance,
(25:36):
So it's something that we're keen to explore here in
the near future.
Speaker 1 (25:40):
Absolutely, that sounds good. So you mentioned the idea of
you know, exploring things in the near future. Wanted to
maybe close with a question around your plans going forward
and kind of where you see wris water work, you know,
focus saying over the next year, and ultimately where you
(26:05):
might see some uh, some cause for optimism because I
think we've had a little bit of a pessimistic conversation here.
It's a concerning situation. But maybe we could get your
your thoughts on those two things to close.
Speaker 2 (26:18):
Yeah, sure, I know these these conversations tend to be
a bit depressing, so I'll do my best here. So
we're we're seeing just you know, increased complications across these
issues based on the interconnectedness, you know, the trade offs
like we were just talking about, and then some of
these issues only being exacerbated with climate change and economic development.
(26:43):
And so we're really striving at w I to take
a more holistic approach to these issues. And we have
a new strategy that's that's trying to look across all
these systemic challenges to and then organize ourselves accordingly internally
(27:05):
to try to generate benefits, you know, across multiple areas.
And of course to do that, we need a lot
more people at the table. And this takes you know,
not just ENGOs and companies, but many others. You know,
no company, no sector is going to solve any of
(27:25):
these problems. We need government as well involved. We need
civil society, you know, we need everyone at the table
to engage on these issues, to agree on a common
vision and how to get there, and everyone involved in
in making that happen. So that then, given the nature
(27:48):
of water requires more kind of place based work. We
got to bring everyone to the table, you know, in
all these areas where where we're seeing significant water risks.
So wi IS is when I first started fourteen years ago,
we just had an office in DC, and we now
(28:08):
have offices all over the world. We are deepening our
engagement in focused countries to really target those high priority
areas and really try to increase our impact on the ground.
So we've been making this transition over many years from
my perspective as being a very research focused think tank
(28:30):
to more of a do tank because we recognize that
it's going to take more than research to solve these problems.
So I'm encouraged by where we're headed, and I'm seeing
not just from within WI but externally a lot more
focus on collective action and how we bring everyone together.
(28:50):
And this is and maybe this is just because I'm
from where I said, I work with the private sector,
but you know they are in many cases the ones
pushing it. They realize they're not going to solve it alone.
They want governments involved, and so I'm hopeful that we
may start to see some more collaboration and collective action
to solve these very challenging systemic problems.
Speaker 1 (29:14):
Absolutely, very interesting. Thank you. I really liked the idea
of transforming from a research think tank to a do tank.
I like it a lot. So I just wanted to
remind our listeners we were joined today by Sarah Walker,
who's the director of Corporate Water Engagement in the Water
(29:34):
Program at the World of Resources Institute. Sarah, thank you
so much for joining us today.
Speaker 2 (29:41):
Thank you Eric, thanks for having me.
Speaker 1 (29:45):
So. You can find more information on ESG data reporting
all things water by going to the Environmental tab on
the ESG team dashboard, bispace ESG go on the Bloomberg terminal.
If you have an ESG quandary, your burning question you
would like to ask bi's expert analysts, send us an
email at ESG Currents at Bloomberg dot net. Thank you
(30:08):
again for listening, and we'll speak to you next time.
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